Latest manufacturing data is 'incredibly positive'

4 mins read

The new year's first set of manufacturing data has been welcomed as "incredibly positive", "truly spectacular" and an indicator that it is "all systems go" for the sector in 2011.

Well respected figures from the Chartered Institute for Purchasing and Supply (CIPS) saw rates of expansion in manufacturing production and new orders accelerate to the fastest since May, underpinned by stronger inflows of new export business. Jobs growth also remained close to November's record high. Cost pressures continued to build, however, as highlighted by the steepest inflation in average input prices since the CIPS Purchasing Managers Index (PMI) survey began in January 1992. At 58.3 in December, the PMI posted its highest reading since September 1994. The headline PMI has remained above the neutral 50.0 mark for 17n successive months. Manufacturing production rose for the 19th month running in December, led by substantial rates of growth in the Electrical, Transport and Chemicals & Plastics sectors. Underpinning the latest increase in output were stronger inflows of new work from both domestic and overseas markets. New export orders rose at the fastest pace since April's series record high, reflecting increased sales to clients in mainland Europe, the US and East Asia. Employment rose for the ninth successive month with manufacturers linking jobs growth to higher production, improved demand and efforts to combat rising backlogs of work. Outstanding business nonetheless rose for the second month in a row. Cost inflationary pressures continued to build in December, as average input prices rose at the fastest rate in the nineteen-year survey history. The steepest cost increases were seen in the Textiles & Clothing, Food & Drink and Chemicals & Plastics sectors, amid reports of higher prices for cotton, food products and energy. Costs also rose substantially in the other sectors covered by the survey. Commenting on the new data, Barclays head of manufacturing Graeme Allinson said: "An incredibly positive set of December PMI figures underscores the fact manufacturing continues to outperform the general UK economy, which Barclays economists now expect to grow by 2% in 2011 and 2.1% in 2012. "In terms of demand for the UK's manufactured goods, a strengthening in household consumption, net trade and investment should offset the fall in public sector demand. Business investment certainly has the potential to grow in 2011, as non-financial firms in the UK have been running substantial cash surpluses in recent quarters. Rob Dobson, Senior Economist at Markit and author of the UK Manufacturing PMI said manufacturing saw a truly spectacular end to 2010. He went on: "The latest data are consistent with manufacturing production rising at a quarterly rate close to 2.0%, which should generate a meaningful contribution from the sector to economic growth in the fourth quarter to offset likely weakness in other sectors. All of this points to manufacturing being a positive spur to economic recovery in the final quarter. CIPS CEO David Noble believed the start of 2011 was likely to be "all systems go" for UK manufacturing, demonstrating a huge turnaround of fortunes compared with two years ago. "They also bode well for a continuation of the manufacturing-led economic recovery next year," he added. "Before we breathe a sigh of relief, last month was not without its challenges. Adverse weather conditions contributed to longer vendor lead times, while surging demand for certain goods has depleted stocks, leading some purchasers to try and replenish inventories. There are also ongoing efforts to guard against rising cost inflation and possible further winter disruption to the supply chain by buying early. With this and also customers likely to see further costs passed down following the VAT increase in January, the economy will still see some pressures" The new year's first set of manufacturing data has been welcomed as "incredibly positive", "Truly spectacular" and an indicator that it is "all systems go" for the sector in 2011. Well respected figures from the Chartered Institute for Purchasing and Supply (CIPS) saw rates of expansion in manufacturing production and new orders accelerate to the fastest since May, underpinned by stronger inflows of new export business. Jobs growth also remained close to November's record high. Cost pressures continued to build, however, as highlighted by the steepest inflation in average input prices since the CIPS Purchasing Managers Index (PMI) survey began in January 1992. At 58.3 in December, the PMI posted its highest reading since September 1994. The headline PMI has remained above the neutral 50.0 mark for 17n successive months. Manufacturing production rose for the 19th month running in December, led by substantial rates of growth in the Electrical, Transport and Chemicals & Plastics sectors. Underpinning the latest increase in output were stronger inflows of new work from both domestic and overseas markets. New export orders rose at the fastest pace since April's series record high, reflecting increased sales to clients in mainland Europe, the US and East Asia. Employment rose for the ninth successive month with manufacturers linking jobs growth to higher production, improved demand and efforts to combat rising backlogs of work. Outstanding business nonetheless rose for the second month in a row. Cost inflationary pressures continued to build in December, as average input prices rose at the fastest rate in the nineteen-year survey history. The steepest cost increases were seen in the Textiles & Clothing, Food & Drink and Chemicals & Plastics sectors, amid reports of higher prices for cotton, food products and energy. Costs also rose substantially in the other sectors covered by the survey. Commenting on the new data, Barclays head of manufacturing Graeme Allinson said: "An incredibly positive set of December PMI figures underscores the fact manufacturing continues to outperform the general UK economy, which Barclays economists now expect to grow by 2% in 2011 and 2.1% in 2012. "In terms of demand for the UK's manufactured goods, a strengthening in household consumption, net trade and investment should offset the fall in public sector demand. Business investment certainly has the potential to grow in 2011, as non-financial firms in the UK have been running substantial cash surpluses in recent quarters. Rob Dobson, Senior Economist at Markit and author of the UK Manufacturing PMI said manufacturing saw a truly spectacular end to 2010. He went on: "The latest data are consistent with manufacturing production rising at a quarterly rate close to 2.0%, which should generate a meaningful contribution from the sector to economic growth in the fourth quarter to offset likely weakness in other sectors. All of this points to manufacturing being a positive spur to economic recovery in the final quarter. CIPS CEO David Noble believed the start of 2011 was likely to be "all systems go" for UK manufacturing, demonstrating a huge turnaround of fortunes compared with two years ago. "They also bode well for a continuation of the manufacturing-led economic recovery next year," he added. "Before we breathe a sigh of relief, last month was not without its challenges. Adverse weather conditions contributed to longer vendor lead times, while surging demand for certain goods has depleted stocks, leading some purchasers to try and replenish inventories. There are also ongoing efforts to guard against rising cost inflation and possible further winter disruption to the supply chain by buying early. With this and also customers likely to see further costs passed down following the VAT increase in January, the economy will still see some pressures"